The PPF released its provisional determination for calculating the 2017/18 PPF levy in December 2016. The rules are deemed to be 'final' except for a small addition the PPF intends to make for the levy charges to schemes with no substantive sponsoring employer.

As expected, with this being the last year of the second levy 'triennium', the PPF has not made many changes to the levy calculation.

A summary of the determination is set out below.

General

  • The levy parameters are remaining unchanged (levy scaling factor = 0.65 and scheme-based levy multiplier = 0.000021).
  • Total levy expecting to collect unchanged from 2016/17 at £615 million.

Experian score calculation

  • The change in accounting standard to FRS102 affects the value of certain company accounting metrics. This could mean that the 'change' variables are referencing accounts that have not been prepared consistently. To mitigate the impact of this, the PPF has introduced a transitional arrangement wherein companies can self-certify if they have been unfairly affected by the change in accounting standard. 
  • There are around 20 companies within the PPF universe where the group parent files 'small' accounts. Where this is the case, the PPF will calculate the parent strength metric by calculating the group parent score on the 'Independent: small accounts' scorecard, rather than the 'Large and Complex' scorecard.
  • Where Experian are using restated accounts to calculate a company’s insolvency score, the PPF will backdate this to the date at which the original accounts were filed (previously the insolvency score using the original accounts is used for the period between the original filing date and the restatement date).
  • The PPF has confirmed that the exchange rate change proposed last year will now be used in converting foreign company accounts (and, indeed, this has been used to calculate Experian scores since April 2016).  As a reminder, the exchange rate at the balance sheet date will be used to convert foreign company accounts (the same exchange rate is used to convert N-3 accounts for 'change' variables).

Mortgage exclusions

  • The PPF will continue to carry forward all mortgage exclusion certificates (providing the criteria continue to be met), with the exception of immaterial mortgages (which need to be certified annually). 
  • For refinance and immaterial mortgage exclusions, the PPF will ask schemes to include a short covering note listing the relevant extracts within the mortgage documentation.
  • For credit rating mortgage exclusions, it will now be possible to submit a single certificate covering multiple employers, rather than having to submit a certificate for each employer.
  • The PPF has updated the immaterial mortgage exclusion to include charges that are not connected to an amount of borrowing, but for which an amount of money may be recoverable in certain circumstances.  For example, where grant funding has been awarded but with the requirement to repay if specified conditions are not met.
  • In relation to refinance mortgages, the PPF has now included situations in which the original mortgage was entered into by one group company and the refinance mortgage by another company within the same group.